Wood Mackenzie: Golden Pass FID crests second wave of US LNG

ExxonMobil and Qatar Petroleum’s announcement that they will proceed with development of the Golden Pass LNG export project at Sabine Pass, Texas, US, kicks off what could be a record year for LNG final investment decisions (FIDs), according to Wood Mackenzie.

The go-ahead for Golden Pass LNG comes as Anadarko and its partners in Mozambique LNG (Area 1) took a major step towards FID after signing sales and purchase agreements (SPAs) with CNOOC, Tokyo Gas-Centrica and Shell.

ExxonMobil (30%) and Qatar Petroleum (70%) said construction at Golden Pass will begin in 1Q19, with start-up scheduled for 2024.

Alex Munton, principal analyst, Americas LNG, at Wood Mackenzie, said: “The US$10 billion liquefaction project, which will have capacity to produce around 16 million tpy of LNG, is one of the few remaining brownfield LNG development opportunities in the US Gulf Coast.”

He added: “The repurposing of the existing facility has commercial logic. The Golden Pass regas terminal, with its five storage tanks, two shiploading berths and header pipeline, already includes much of the infrastructure needed for an export project. Even if costs come in at slightly above the US$10 billion mark, on a dollars-per-tonne basis, it's still one of the lowest-cost opportunities for new large-scale liquefaction capacity anywhere in the world.

“From a cost standpoint, the timing is prudent. Proceeding with construction now will enable the project to lock in costs and minimise exposure to inflationary pressures before the next cycle of global LNG investment heats up. By moving ahead now, the partners ensure that Golden Pass will be at the forefront of the second wave of US LNG.”

Golden Pass offers Qatar Petroleum the opportunity to optimise shipping costs, particularly into Europe and Latin America. It also helps Qatar protect its market share as it seeks to leverage all its LNG assets in response to a changing market structure.

“To delay FID any longer would simply create the space for other US LNG projects to be developed. Golden Pass would miss out on the opportunity to press home the brownfield advantages it has over planned US greenfield projects in terms of cost and schedule,” Munton added.

There are advantages for ExxonMobil too. The company is the second-largest producer of natural gas in the Lower 48 and Golden Pass supports additional upstream supply development, although the project partners have not announced intentions to tie the export project directly to ExxonMobil’s upstream production.

The project further strengthens ExxonMobil’s relationship with Qatar, the most valuable country in its global portfolio. Through its joint investment in Golden Pass LNG, it will be deepening this relationship and working with Qatar Petroleum to diversify both upstream and internationally. Further upstream deals between the two should be viewed as likely.

ExxonMobil said in its recently announced 4Q18 results that Rovuma LNG (Area 4) in Mozambique was also on its target list for FID this year.

Liam Kelleher, an analyst on Wood Mackenzie’s Global LNG team, said: “Rovuma will share some plant and marine facilities with the adjacent Anadarko project – Mozambique LNG (Area 1). Anadarko is also targeting FID in 2019 and made some significant progress in the first week of February, signing three long-term SPAs totalling 6.1 million tpy.

“This brings the project’s total volume contracted in long-term sales to 7.58 million tpy, just shy of the 8.5 million tpy Anadarko says is needed to secure financing for the 12.88 million tpy development.

“However, Anadarko has stated that further deals are under negotiation as it looks to reach its stated goal of taking FID during the first half of the year.”